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France and German square off over strong euro

How worried should eurozone policymakers be about the rise in the value of the euro?

Is the region set to lose out in a new currency war involving the euro, the dollar, the pound, the yen and the Swiss franc?

Having a strong currency puts the euro area at a disadvantage in terms of exports, growth and jobs.

In the last three months the euro has risen around 20 percent against the yen, eight percent against the pound, seven percent versus the dollar and three percent compared to the Swiss currency.

Germany is not concerned, but France want a medium-term euro exchange rate target and will raise that at the region’s finance ministers’ meeting next Monday.

This week French President Francois Holland told the European Parliament: “We need to think about the place of our currency, the euro, in the world. It can’t fluctuate according to the market’s mood. A monetary zone must have an exchange rate policy or else it ends up being subjected to an exchange rate that does not match the true state of its economy.”

Finance Minister Pierre Moscovici then said: “The euro’s level is not a negligible matter for growth.”

Speaking on the sidelines of a business fair on Wednesday Moscovici told reporters: “Even if there must be no pressure on the European Central Bank, discussing among Europeans what might constitute a fair level for our currency and how to get there is legitimate, and it is also legitimate among other big countries and economic zones, at the G20.”

Germany, which has traditionally distanced itself from French gripes about the euro, did so again within minutes of the remarks from Moscovici.

A German government spokesman said that the euro was not overvalued and it was sensible for financial markets to determine exchange rates.

The Japanese yen is at the centre of concerns that some countries are trying to devalue their currencies to boost growth.

It has slipped further recently on expectations the new Bank of Japan governor will ease policy aggressively – basically printing money – once in office.

The pound remains weak on the belief the new UK central bank governor – who starts in July – could adopt further monetary easing.

And there is more bad news for the euro as the US Federal Reserve recently left its ultra-loose monetary policy unchanged with open-ended bond buying and dollar creation.

Copyright © 2014 euronews

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